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An Introduction to ICSID
Meg Kinnear, ICSID Secretary-GeneralTuesday, February 3, 2016
World BankTokyo, Japan
What is ISDS?
ISDS is investor-State dispute settlement
• resolves disputes between a foreign investor and the host State before an international tribunal
• offered by States in their treaties, contracts and foreign investment laws
• may be arbitration, conciliation, mediation or fact-finding
2© 2016 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.
What is ISDS?
• ISDS provisions are mostly found in international investment treaties (IIAs)
• IIAs contain substantive rules for protecting investments, mainly:
Non-discrimination compared to domestic and third-country investors (National and Most-Favoured-Nation Treatment) Fair and Equitable Treatment (FET) Prohibition of expropriation without compensation Free transfer of funds
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What is ICSID?
• Created in 1966 • Only institution established by States to
administer international investment arbitration• World leader in the field
– has administered 70% of all cases
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• Self-contained & delocalized process• Impartial case administration• Expertise• Cost-effective fee structure • Binding & enforceable awards
Special Features of ICSID
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International Membership: 152 States
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Structure of ICSID
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ADMINISTRATIVE COUNCIL
• One representative of each Contracting State
• One vote per State
• Chair: President of the World Bank (no vote)
FUNCTIONS
• Adopt ICSID arbitration and conciliation rules
• Adopt annual Budget
• Determine conditions of service of Secretary-General and Deputy Secretary-General
SECRETARIAT
• Secretary-General
• Deputy Secretary-General
• Staff
FUNCTIONS
• Support proceedings
• Training and publications
© 2016 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.
ICSID Caseload (to December 30, 2015)
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1 2 1 2 2 3 41
41 2 1
3 3 3
10 11 1012
14
19
31
27 27
23
37
21
25 26
38
50
4038
52
0
10
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Cases Registered under the ICSID Convention and Additional Facility Rules
Increase in Global FDI
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9Source: UNCTAD, FDI/MNE database (www.unctad.org/fdistatistics)
More Investment Treaties
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Source: UNCTAD, IIA database
ICSID Cases by State Party
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South America24%
Central America & the
Caribbean6%
North America (Canada, Mexico
& U.S.)4%
Eastern Europe & Central Asia
25%
Western Europe7%
Sub-Saharan Africa16%
Middle East & North Africa10%
South & East Asia & the Pacific
8%
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ICSID Proceedings
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Convention
Both disputing parties from ICSID
Member States
Conciliation
Arbitration
Additional Facility
One disputing party from Member States
Conciliation
Arbitration
Fact-finding
Other
Need not be from Member State
Case administration under other Rules or
Treaties (e.g.: UNCITRAL or other
investment cases; FTA cases; State-to-State
cases)
Other functions on consent of parties
(e.g.: Appointing Authority, Mediation,
Registry)
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Consent is the Cornerstone of Jurisdiction
Sources of Consent:
• Contracts• Investment Laws• Bilateral Investment Treaties• Multilateral Agreements
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Source of Consent
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ASEAN Agreement for the Promotion and Protection
of Investments0.2%
Bilateral Investment Treaty (BIT)
60.3%
Dominican Republic-United States-Central America Free
Trade Agreement (DR-CAFTA)
0.8%
Investment Contract between the Investor and
the Host-State17.3%
Investment Law of the Host-State
9.3%
North American Free Trade Agreement
(NAFTA)2.9%
Energy Charter Treaty (ECT)8.8%
Oman-U.S. Free Trade Agreement (Oman-U.S. FTA)
0.2%
Canada-Peru Free Trade Agreement
(Canada-Peru FTA)0.2%
Central America-Panama Free Trade Agreement
0.2%
Conditions for ICSID Jurisdiction -Article 25(1) of the ICSID Convention
• Legal Dispute• Arising Directly out of an Investment• Between a Member State• And National of Another Member State• Consent in Writing
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What is an “Investment”?
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Significant undertakingDurationRiskRegularity of profits Contribution to development of
host State
Apply the definition in the instrument of
consent
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Objective Approach Subjective Approach
Examples of Investments
• Exploration and exploitation of natural resources (mining, oil and gas)
• Rights under concession agreements• Building and operation of infrastructure projects • Shareholding in a local subsidiary
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Corporate Nationality Rule Example
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Host State: SenegalHome State: USA
Who are the Investors in Cases?
• Nationality– To date: 2 cases with Japanese investors – no
cases against Japan– About 56% of claimants are from EU member
States – many are “inter-EU cases”
• Profile– About 18-22% are small & medium-sized
enterprises and individuals © 2016 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.
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Conduct of an ICSID Arbitration
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Transparency
• Different provisions apply to:
o The Centre
o Tribunal Members
o Parties
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• Publish information on cases (Administrative and Financial Regulations 22 & 23)
• Must publish excerpts of awards (Article 48, ICSID Convention)
• Seek consent of the parties to publish records of proceedings, decisions, and the full award of concluded cases
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Rules Applicable to the Centre
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Rules Applicable to Arbitrators
• Duty to keep all information confidential, including the contents of the award (Arbitration Rule 6(2))
• Deliberations take place in private and remain secret (Arbitration Rule 15)
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Rules Applicable to the Parties
• No general requirement of confidentiality or transparency under ICSID Convention and Rules
• Release of case documents must not exacerbate the dispute
• Parties sometimes conclude confidentiality agreements
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Open Hearings – Arbitration Rule 32(2)
• Unless either party objects, the Tribunal may allow third parties to attend or observe all or part of the hearings
• Subject to appropriate logistical arrangements
• The Tribunal establishes procedures for the protection of proprietary or privileged information
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Costs of Arbitration 3 Components
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Parties’ expenses
Arbitrators’ fees and expenses
Centre’s administrative
charges
Parties’ Expenses
• Costs of legal representation
• Witnesses
• Experts
• Any other cost relating to the presentation of a party’s case
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Arbitrator Fees and Expenses
• Arbitrator fees: 3,000 USD per day of meeting or other work performed in connection with proceeding
• Arbitrators also reimbursed for:o Direct expenses reasonably incurredo Travel expenseso Subsistence allowances (when traveling)
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• Administrative fee of 32,000 USD, charged on annual basis and usually shared by parties (16,000 USD each)
• Includes:oHearing Facilities at the World Banko Services of the Tribunal Secretary and case
teamo Financial Administration of the case
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ICSID Administrative Charges
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© 2016 by International Centre for Settlement of Investment Disputes. Content may be reproduced for educational use with acknowledgement.
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Tribunal has Discretion to Allocate Costs
24%
24%
52%
Costs Awards since 2009
Cost Awards in favor ofClaimant(s)
Cost Awards in favor ofRespondent
Each Party Bears Own Costs
ICSID 1818 H Street, N.W.
Washington, D.C. 20433USA
Tel: + 1 (202) 458-1534Fax: + 1 (202) 522-2615 or 522-2027Website: www.worldbank.org/icsid
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